The Australian Dollar reduced its losses due to the Reserve Bank of Australia’s (RBA) careful policy and strong employment data. The RBA Meeting Minutes suggested that if data remains positive, the cash rate might not change. Unemployment dropped to 4.3% in October from 4.5% previously. The US Dollar dipped a little, trading around 99.50, as the market waits for US economic data and a possible Federal Reserve rate cut. The CME FedWatch Tool revealed a decrease in the chances of a 25 basis point cut at the December meeting, falling from 62% to 43% in one week. Officials highlighted vulnerabilities in the labor market and urged caution regarding rate cuts.

The AUD/USD Pair

The AUD/USD pair hovered around 0.6490, showing little movement. It traded below the nine-day EMA, with key support at 0.6470 and resistance at 0.6514. Several factors influence the Australian Dollar, such as RBA interest rates, the health of the Chinese economy, and iron ore prices. The table indicated the Australian Dollar’s weakness against the Swiss Franc. Various elements impact the AUD, including interest rates, export prices, and trade balance, often tied to the Chinese economy. Currently, there is a noticeable difference in policy paths between the RBA and the US Federal Reserve. The RBA is maintaining its interest rates, backed by a surprisingly strong domestic economy. In contrast, the Federal Reserve seems more inclined to cut rates due to a slowing US labor market.

Global Environment for Risk-Sensitive Currencies

Recent data showed Australia’s inflation for the third quarter unexpectedly rose to 3.1%, remaining above the RBA’s target. Additionally, iron ore prices, crucial for the Aussie dollar, have stayed strong, recently trading at about $125 per tonne due to steady Chinese demand. These factors support the idea that the RBA might hold off on rate cuts until late 2026. Meanwhile, the US economy shows more signs of slowing. The latest Non-Farm Payrolls report for October, released in early November 2025, indicated only 85,000 jobs were added, falling short of forecasts and confirming existing labor market weaknesses. This came after a US Core CPI reading that dropped to 2.8%, providing the Fed more leeway to ease policy without triggering inflation. For traders dealing in derivatives, this scenario suggests preparing for possible AUD/USD strength in the coming weeks. The pair is currently moving within a range of about 0.6470 to 0.6630, offering a chance to buy call options expiring in January 2026. This strategy would capitalize on a potential breakout while limiting initial risk. However, we must also consider the risk that this breakout may not occur. The 0.6470 level is a significant support point; a consistent drop below it could challenge our optimistic outlook. Traders might use this level to establish stop-losses on long positions or think about buying put options as protection against unexpected weakness in the Aussie dollar. Overall, the global environment seems to be improving for risk-sensitive currencies like the AUD. The anticipated finalization of a rare earths agreement between the US and China by Thanksgiving could enhance global trade sentiment. If this improved risk appetite develops, it would provide additional support for the Australian dollar. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now